A lien is a legal claim on a house used to ensure payment of a debt. For example, local governments place liens on houses when the owners fail to pay their property taxes. Banks and other lenders can place liens on houses too.
Liens make it difficult to sell a home. Lenders will not approve mortgages to buy homes that have liens against them. Instead, they will require the liens be removed first. Buyers are also reluctant to purchase homes with liens, because when you buy a home with a lien you become responsible for paying the debt associated with it.
Liens give creditors the legal right to take ownership of a home under certain circumstances. Liens are one type of encumbrance. There are also other encumbrances in real estate.
What is an encumbrance in real estate?
An encumbrance is a legal claim that limits how the owner can use a property. Common kinds of real estate encumbrances include:
- Easements. Easements give a third party the right to enter your property without your permission or use it for a specified purpose. For example, utility companies often have easements that give them the right to enter your property and make repairs to their equipment. Learn more about property easements.
- Encroachments. Encroachments are when a neighbor builds a structure like a fence or a garage on your property. They can cause legal and liability issues. Learn more encroachments.
- Restrictive covenants. Restrictive covenants are common when the property is part of a condo or homeowners association. They can limit the home improvements you are allowed to make, the landscaping and exterior decoration you can choose, and more. You are often required to pay association fees when your home is subject to a restrictive covenant too.
- Leases. When you buy a leased property, you are often required to honor the terms of the lease until it expires.
- Zoning. Most properties are affected by zoning rules. For example, zoning can limit the kinds of additions you make to a house or the kinds of businesses you can run from a home.
Before you buy a property, you’ll want to know if there are any liens or encumbrances against it. Liens and encumbrances are typically found during a property title search. Sellers are also typically required by state laws to tell potential buyers about liens and encumbrances in their real estate disclosures.
How do you remove a lien on a house?
When a lien against a home is valid, the simplest way to remove the lien is to pay off the debt associated with it. You’ll want to get a Release of Lien from the creditor and file it with your county government to ensure the lien has been legally removed from your home. It is possible to remove liens by negotiating with the creditor or filing for bankruptcy as well.
When a lien is invalid, you can ask a court to remove it. Invalid liens can be the result of an error made by a creditor or an illegal act such as fraud. You will probably need to hire a real estate attorney to help you work with the court to get an invalid lien removed.
Last reviewed and updated January 2023 by Freedom Mortgage Corporation.